by Anushree Ghosh
Before civilization saw the wrath of political bureaucracy and money became the superpower, barter system prevailed in many cultures. People used animals as currencies and later silver and gold played a pivotal role. Today, the US dollar enjoys this limelight – the position of the rupee is relative to what it holds against the US dollar.
When India got independence in 1947, the Indian rupee was almost equivalent to the US dollar. The government began to borrow money for developmental causes, especially with the inception of its 1951 five year plan. Thus, the devaluation of the rupee was set in motion. In 1991, the financial crisis made India devalue rupee further. And, stuck in the web of inflation and low economic growth, devaluation became a constant process. But, in the last few months, the volatile depreciation has pressed the panic button. With Indian rupee depreciating frequently against the US dollar, India’s account deficit is widening at an alarming rate.
The reasons for this instability are the low foreign investment in the country, domestic inflation and the rise in crude oil prices.
It has its impact on every sector and therefore real estate also does not remain unaffected.
A weaker rupee makes it a lucrative option for the NRIs to invest in Indian properties. The depreciated value has made the luxurious and high-end properties affordable for foreign investors.
As the Indian real estate has already gone through the stage of stagnancy for quite some time. The developers are offering many schemes, discounts and easy instalment options. But, the eroding rupee makes the imports expensive, increasing the prices of the raw materials. This increases the overall costs of real estate projects, making it difficult for Indian investors to deal in real estate. Although, Buyers, who are spending their monthly salaries on EMIs, feel the real heat
Increased Interest Rates
The low value of the rupee could pressurize RBI to increase its interest rates. This means that repayment of loans would get expensive, making it difficult for the investors to make the profit from the low margin.
Rental Real Estate
NRIs seeking an opportunity to make a profit from the depreciating Indian currency will invest largely in real estate. This will clear up the standing inventory, and due to less availability of rental properties, the rental prices are expected to rise.
Investors who choose their investment opportunity wisely can make the best out of this situation.